Consider a floating strike version of an exponential arithmetic Asian call (Problem 14.6) with European exercise right, contingent on a forward contract with T_F > T. Assume that S₀, T, r, σ, and λ are known. Additionally, the option is knocked out, if S_T/2 ≤ S̅_T/2 holds. Create a pseudo-code algorithm to valuate this contract at time t = 0.

Problem 14.6

A continuously exponential averaged arithmetic Asian option is a contract, where the average price of the underlying is computed as

The parameter λ ≥ 0 is an arbitrary weight factor. Rewrite the averaging condition in differential form and explain the effect of the parameter ?.

Transcribed Image Text:

e-(1-t) S;dr Š, = e-" So + A